from the look-at-the-bottom-line dept

As pretty much everyone knows, focus and perspective make all the difference in how you view anything from politics to family, and in business too. Many times in discussions on the true impact of piracy, the comments are flooded with what seems to be two firmly entrenched sides. You have those that suggest that the focus should be on whether or not infringement is wrong. On the other side, you have those that want to look at the overall impact of what is occurring.

Now, I won't stake out a position on the validity of either argument, but one of the things I hear quite often from those making the moral argument is that it's important to consider the wishes of the creator when thinking about this stuff. I happen to agree. But I also happen to think that an important change that is occurring is that creators are beginning to push away from the easy reaction of getting upset at piracy and beginning to look at the vastly more important bottom line of their business.

"This post was going to be about Christmas and how it was responsible for the (relatively) long term increase in my app sales."

But then he noticed something strange. He found that the timing with folks receiving new phones or devices for Christmas didn't really match up with the sales. Also, even after what you would expect to be the Christmas rush, the increase in sales maintained. He supplied the graph below:

Note that, whatever the timing, as piracy of his app increased, so did sales, although certainly not to correlating scale. But who cares? He got more sales! As Daniel himself notes:

"It's pretty obvious why developers get upset about piracy: uh, it's stealing. Aside from that, I'm pretty straightforward about the fact that decisions should be profit-driven. Throughout Punch 'Em!'s paid lifetime, I couldn't raise its sales count in the long term. So if thousands of users end up pirating my app, but hundreds buy it as a result of hearing about it from their pirate buddies, why should I cry?"

Forgive Daniel for conflating infringement with stealing because, as I said, I understand the natural reaction to get upset at piracy. His conclusion is far more important: it's the bottom line that matters. And that brings me back to the premise I posed at the beginning of this piece, that focus and perspective make all the difference. The bottom line is that two things happened at the same time for Daniel's iPhone app. Infringement increased nearly 40x and sales increased by more than 2x. He could easily have focused on the infringers and the fact that clearly his sales should have gone up more than 40x (even if that's not strictly a factual way of looking at it). Instead, he focused on the fact that his sales doubled, and now he's happy. And he even tried to go the DRM route and found out why that path didn't work:

"Interesting thing, I had code in previous versions which did just this. It checked (through various means) if the IPA had been cracked, displayed a message asking that they purchase the app, and exited. My conversion rate was 0%. Beyond the conversion rate issue, my app was pirated very little--after all, my app quit almost immediately, so why share it at all?"

As Nina Paley said recently, sharing increases value. Focus on the value awarded by sharing and you'll find that "piracy" can make you happy (and money!). Isn't that bottom line the most important thing on which a business can focus?

from the drink-up dept

A few years back, we wrote about how indie iPhone app developer Hottrix had sued beer giant Coors for making a competing beer app. Hottrix, of course, makes various gimmicky apps that make your iPhone look like it is full of some sort of liquid that "drains out" as you tilt the device to make it look like you're "drinking" from the phone. They're pretty silly, but some people have liked them and were actually willing to give Hottrix money for them. One of Hottrix's apps was iBeer. Coors created their own beer drinking app, called iPint, and offered it for free. That's when Hottrix sued. I can't find any information on what happened to that lawsuit. After it was filed nothing much seems to have happened. Perhaps it was settled out of court?

Either way, Hottrix seems to have learned a simple lesson: if some big company makes any sort of "drinking app," be sure to sue. The latest target is chocolate giant Hershey, which made a chocolate milk drinking app which wasn't even a "clone" of Hottrix's app. After Hottrix threatened to sue, Hershey sued first for declaratory judgment and Hottrix counter-sued. Hershey reasonably asked the court to dump Hottrix's lawsuit, but the court has refused. I'm having trouble understanding why. It is true that Hershey had first reached out to Hottrix about having it make a similar app for Hershey, but even after Hershey went to another developer instead, it's hard to see what is "protectable" under copyright that Hershey copied here. As has been pointed out over and over again, copyright doesn't protect the idea, just the expression, and this appears to be an entirely different expression, even if it is based on the same idea.

The case might still turn out in Hershey's favor, but the judge is claiming that a full trial is necessary, as Hottrix has sufficiently pled its case, though I'm still trying to figure out how that's possible. As you read the details of the case, you realize that Hershey's app is actually quite different than Hottrix's. Yes, both involve the basic idea of drinking, but Hershey's app has different features. You don't "drink" out of the corner of the app, but out of a "straw" that you add to the app. The Hershey's app includes (not surprisingly) the ability to add chocolate syrup to the milk -- which Hottrix's app does not have. The court argues that because Hershey had obviously seen the original app, and that its own app is similar enough that this issue needs to go to trial. However, given the fact that it's difficult to see what's protectable, this seems like a huge waste of court resources. Hopefully the court realizes this eventually, but it seems like a waste of time to have to go through a full trial to make the obvious point that Hottrix doesn't deserve a total monopoly on "drinking" apps.

from the seems-like-a-stretch dept

One of those class action specialist lawsuit firms, who seem to file lawsuits mostly designed to make the lawyers money, rather than correct any sort of improper actions, has sued Apple and some app makers over supposed privacy violations. At issue is the fact that some apps pass on the unique UDID code that is associated with each iPhone to advertisers. This lets advertisers track the same user across multiple apps -- similar, in some sense, to a browser cookie. The "difference" is that a browser cookie is deletable, while you're stuck with your UDID. This all came out a couple weeks ago in a WSJ article, and since these kinds of lawyers are opportunists, they're always quick to jump on any lawsuit opportunity whenever the press highlights a story like this.

Not surprisingly, it appears this case is yet another attempt to abuse the CFAA (Computer Fraud and Abuse Act), which is generally thought of as an anti-hacking law, but which is continulously stretched and abused to pull in other situations. In this case, the lawyers are claiming that accessing the UDID without permission is the equivalent of accessing a computer without authorization. Think about that for a second and then realize how silly this is. No one is hacking anything to get this info. The info is made available, and so it's been shared. Using the CFAA here is ridiculous. They also seek to use a similar California anti-hacking law in a similar way. This is clearly not what those laws are intended for.

Furthermore, it seems silly to blame Apple for the way that some app providers are sharing data. To get around this issue, the lawyers rely on two key points. First, that Apple itself recently changed its terms to ban apps from sending data to third parties such as ad networks. Of course, most people realized this was not about protecting privacy, but about forcing developers to use Apple's own ad platform. Second, the fact that Apple approves each of the apps in the marketplace. I know that some people assume this automatically adds liability to Apple for anything those apps do, but that seems like a bit of a stretch as well. It's ridiculous to assume that Apple tests all aspects of an app, and thus becomes liable for anything those apps do.

All in all this looks like yet another attempt by some lawyers to take some fear mongering and make some money out of it. It's not going to do anything to protect anyone's actual privacy.

from the don't-get-swept-up dept

Like many people, I recently got an Android-powered smartphone, and had plenty of fun seeking out various apps to make the phone "better." It can be pretty cool at times, but even I've realized that I use a very small percentage of the apps I got, and I rarely go looking for new apps these days. Nearly two years ago, we discussed a study highlighting how many iPhone apps were installed, but went unused, and wondered if that might be an early warning sign that apps aren't quite as popular as people think they are. Of course, these days, app hype has reached ridiculous levels, with many companies literally betting their business models on the success of apps. There definitely is value in apps, but I do worry that the focus on apps is leading people to overestimate their importance.

Some new evidence echoes that study from a couple years ago, and again suggests that those who are now obsessed with apps may wish to be at least a bit cautious about the opportunity. Nate was the first of a few to point us to the latest Pew study, which also shows an awful lot of people with smartphones that have apps, just don't use them. Of course, some of it may be semantics. The study notes that there may be confusion over whether or not pre-installed functionality is an app or not. Still, it should remain at least a cautious warning sign that app downloads does not mean app usage...

from the time-to-move-to-the-open-app-market dept

As a whole bunch of you have been submitting, apparently Apple yanked Grooveshark's iPhone app after receiving a complaint from Universal Music, one of the record labels who has sued Grooveshark, and is claiming that it has not properly licensed the music. Grooveshark has argued for years that what it's doing is legal, but multiple record labels have disagreed. Still, Apple wants to keep the major record labels happy, so bye-bye Grooveshark. Perhaps they should explore creating a web app and putting it on something like the OpenAppMkt, since that's outside of Apple's control...

from the this-won't-save-your-business dept

Back in 2003/2004, both the music and the mobile industries became infatuated with ringtones. These short snippets of music were selling for 2.5 times (or more) what a single (full) music file was selling for, and the market was growing rapidly. Of course, some of this was due to incredibly shady practices, such as tricking people into thinking they were buying a single ringtone, when they were really signing up for a monthly subscription. However, from the very beginning of the ringtone revolution, we were amazed at how many folks in the industry talked about ringtones as a savior. As we pointed out in 2004, it wasn't hard to predict that ringtone sales would peak and fall. First of all, it would become increasingly easy to take music that people had from elsewhere (authorized or not) and convert it to a ringtone, and secondly, it wouldn't be all that long until unauthorized ringtones became easy to set up as well.

But the industry has a way of overhyping a fad that's happening "now," and betting it will be its savior.

And, of course, exactly what was predicted way back when is now coming true. The ringtone market has been on the decline for a few years now, as people realized they didn't need to pay exorbitant prices for a tiny snippet of music anymore.

This is why we should think carefully whenever we hear people claiming that "app stores" are the new saviors of various content industries (or, for that matter, the mobile industry). While app stores are a bit more defensible than pure ringtones, it's likely to still face the same basic trajectory, as people realize that apps are just data, and there are increasing opportunities for more open solutions to route around locked-down versions. People seem to think there's some sort of magic in "apps," but they're really just the same sort of digital content that has been hard, economically, to monetize long term. There are ways to do it, but simply assuming that apps alone will be the answer is likely to end in disappointment.

from the html-it-up dept

In all of the fuss, hype and obsession over the iPhone/iPad app store, people seem to forget that when the iPhone first launched, it had no app store and no ability for third party developers to create native apps. Instead, Steve Jobs suggested the high quality Safari browser on the iPhone meant the end of native apps, as everything could and should just be done in HTML. And yet, a year later, Steve Jobs totally changed his tune, the iPhone app store was launched, and suddenly this obsession with everything "apps" began. Of course, the media industry fell in love, because they thought that they could regain an element of control, thanks in part to Apple's incredibly arbitrary iron fist over what got into the store.

And yet... in all of that, it seems that many people forgot that original promise of apps all just being created in HTML. Indeed, if you look beneath the surface, you would realize that many iPhone apps really are just made in HTML and then compiled into being native iPhone apps. Using HTML alone, you can access many of the phone's features and certainly create all sorts of apps. But still, there has been general anger over Apple's mercurial gatekeeper activities. Back in January, we noted that Google had remembered the ability to create apps via HTML and had simply routed around the App Store. It made us wonder why others weren't doing it too.

While there have been a few "independent" app stores for the iPhone, they've all required jailbreaking the phone. And while that's now officially legal as per the Library of Congress, it's still not something your everyday iPhone user wants to do. So I've been somewhat fascinated by a new offering that's launching today called OpenAppMkt, which effectively creates a brand new app market for iPhones all via HTML (both the openappmkt app itself, and all the apps in it are HTML based). The experience is very much like the regular app store, with the small exception of having to tap the "add to home" button:

While many of the initial offerings in the OpenAppMkt are free, it does let developers charge for their apps as well. Effectively, this is an entire "app market" for the iPhone that simply routes around Apple as a gatekeeper, and there's really not much that Apple can do to stop it. And, of course, since the apps in the OpenAppMkt are just HTML, it likely won't be difficult for OpenAppMkt to extend this to other platforms as well, such as Android (even though Android's much more open market means that there's less of a reason to developers to use OpenAppMkt for Android).

Overall, this fascinates me for two reasons. First, it's good to get more people realizing that HTML is already pretty damn good at creating app-style experiences, without having to create special compiled code and, second, it's a really clever way to totally route around Apple as a gatekeeper (without requiring a jailbreak), and is a reminder that even on "closed" systems, openness will often find a way.

In the mid 90s, a friend of mine was involved in a project to recreate magazines like Time on CD-ROM for the multimedia PCs of the era. The results were pretty cool, but the CD-ROM versions of the publications hardly replaced their print counterparts. Content has since moved from optical disk to the web, and now the allure of tablet devices has created a market for specific newspaper and magazine apps -- the number one paid app for iPad is a digital version of Wired, which sold about 1,000 copies an hour the first day it was launched. While it's a much better effort than some of the other efforts, more than anything Wired for iPad shows the weaknesses of media apps and demonstrates how the tablet remains a still-imperfect medium to deliver this type of content.

Wired's efforts, like the CD-ROM efforts of the past, by has some cool features. A video clip of Toy Story 3 graces the cover and there are various interactive features, but more than anything else, it feels like a scanned in copy of the paper mag. Although navigation is better than most iPad magazines, it's still never clear when a screen should be scrolled down or just swiped horizontally.

Gartenberg notes that the iPad version is, in some ways, a worst of both worlds. It's not like the website, which is easily shared or emailed or discussed with others. Most of that functionality is effectively missing, which is really quite limiting for folks who are used to sharing the news as a part of experiencing it. Second, it doesn't allow physical notations or markup the way an actual paper magazine does -- or, again, the ability to easily share the magazine with others. You could share your iPad, but that's not quite the same thing...

He then goes on to point out the ridiculous economics. We've already seen other media publications come out with crazy pricing, but Wired unfortunately followed suit, and it makes little sense given the economics involved (which, Gartenberg points out is ironic, given editor-in-chief Chris Anderson's last book on "Free" in business models:

Even worse, the price point is hard to swallow. Charging the full cover price for a digital magazine makes no sense when I can subscribe to the paper edition of Wired for a year at a much lower cost per issue -- especially given that there's no paper, ink, shipping or distribution charges. Given the lack of flexibility, I'd assume there would at least be some incentive to get me to make the digital purchase, and even more so in light of the fact that the bulk of the content is already available online at Wired's website for free. It's ironic that Editor-in-chief Chris Anderson famously wrote a book called "Free" -- the Wired iPad app is the perfect case to try out some of those business models.

Of course, the obvious retort is the damn thing sold like hot cakes when it was released. The real question, though is how sustainable will that really be in the long term? As more people realize how much they're paying, they may wonder why. And I'm still confused as to why publications like Wired hype up all these special features for the iPad... but don't offer the same functionality on the web -- which they easily could.

from the oh-come-on dept

Trademark law, when used properly, serves an important purpose in making sure that consumers are not made worse off by being tricked into buying lower quality products and services under the belief that they're actually coming from someone else who is trusted. But in the age of the "ownership culture," where too many people have tried to twist trademark law away from its true origins to make it appear to be a quasi-"property right," you get too many cases of people using trademark law to actually make consumers worse off.

The makers of the app, Mutual Mobile, have made a bunch of successful iPhone apps, but UT got upset last year when the company introduced the UT Directory, which put a much more useful interface on (you guessed it) the UT staff and student directories. After the University complained, the company felt that perhaps the use of the school's colors made it look like an "official" app, so they agreed to fix that part. When the company launched iTexas, it made sure that it didn't have the school's color scheme or do anything to make it appear as the official app. But it did make the app a lot more useful:

A free download, the app retains the searchable directory but also lists menus from different cafeterias across campus, tallies students' dining-card and Bevo Bucks balances, delivers class schedules, shows campus maps, and more.

This sounds like a great and rather useful app. Exactly the sort of thing that the University should be encouraging, not just because it would help some alumni succeed, but also because UT students would likely find the app quite useful. But, that's not the way UT officials think, apparently:

On Feb. 1, the Mutual team learned that UT had raised another objection to its latest app, specifically to the use of the word "Texas" in the name. "As this name is confusingly similar to the Texas [trademark], UT objects to such use," reads a notice sent to the Apple app store by attorney Wendy Larson. UT's board of regents began trademarking university properties back in 1981. A list of protected trademarks appears on the university Office of Trade mark Licensing Web page; alongside more specific trademarks such as Bevo and Lady Longhorns is, simply, Texas.

Lesson learned: don't try to make life better for UT students without first paying the University.

from the apps-can-be-copied-too dept

One of the things I didn't get a chance to discuss in my recap of Midem was that there was definitely an undercurrent of people thinking that "apps" are the "answer." There were a bunch of app companies there, and they were swamped with interest, and lots of people seem to be looking at Apple's "success" with the iPhone app market as a chance to regain control, and with it, something to charge for directly. While I don't think many people were expecting apps to be "the answer," there was certainly an impression that apps are going to be a big part of the future. As I've made clear in the past, I'm pretty skeptical that this sort of app madness is really sustainable (or all that lucrative). There are a few reasons for this:

Very, very, very few apps make very much money. We've been suggesting this for a while, and the numbers seem to support it: there really isn't that much money being made directly on selling apps, even on the iPhone. Sure, lots of apps may be selling in aggregate, but very few individual apps make very much money.

Apps are still loss leader/low-margin leaders for hardware makers, and they know it. Sure, Apple wants app developers to be happy, but first and foremost it wants to sell more hardware, which is where it makes its money. And it knows as well as anyone that the more powerful the device is, the more reasons there are to buy the hardware. That means the hardware makers actually have incentive to push the price of apps down (or encourage free apps). This pressure will only get stronger over time.

Apps can be copied too. This is the one that seems the most obvious to me, but seems to get very little attention from those who believe totally in the app revolution. Apps are still digital files and they can (and are) copied regularly. Thinking that putting everything into an app is an easy response by itself to unauthorized copying is a bit short-sighted.

Future standards will break down some walls. While it won't happen that fast, and probably won't happen in all areas where apps exist, things like HTML 5 will certainly break down the walled gardens found on various app stores. Yes, native apps give a better user experience for now, but web standards will get better and better and allow more to be done via the web, totally bypassing any app gatekeeper (and paywall), just like Google did with Google Voice on the iPhone. We've seen this before. The desktop used to be ruled by client-side apps, and then lots of those apps went (or are in the process of going) web-based.

App overload. While there is a group of folks who constantly get new apps, an awful lot of people get a few apps, get themselves comfortable and then never go back to buy another app. There are really only so many apps most people need, and once they have them, there's little reason to keep getting more.

This isn't to say that anyone should be ignoring the app space, or that there's no money to made in apps. It's just that the folks acting like it's going to be "the way" that things are done in the future are going way overboard. It definitely still makes sense to have some sort of app strategy and to play in the space somehow, just not to bet everything on it. And some apps can certainly make money, but a key might be to focus not on selling the app itself, but on using the apps to provide a scarcity. For example, I've heard good things about the new This American Life iPhone app, though it's mainly because of the convenience it provides over alternatives for now. Alternatively, you could see apps that drive people to other scarcities doing quite well. But focusing on just selling apps because that's the next big thing? Might not be the best strategy for most...